Markets likely to make optimistic start of new week

Indian markets snapped 3-day losing streak and ended higher on the back of short-covering amid hopes of stimulus package from government. Today, the markets are likely to make an optimistic start of new week as the Finance Ministry announced measures to boost the economy on Friday evening post-market hours. The government announced a slew of measures to boost the economy, including rollback of enhanced super-rich tax on foreign and domestic equity investors imposed in the Budget. Finance Minister Nirmala Sitharaman has said the India's Gross Domestic Product (GDP) continues to grow at a faster pace than the global economy and any other major economy. Besides, Industry body CII has said the multi-sectoral and multi-dimensional policy stimulus announced will have significant impact, imparting stability and underpinning a new growth impetus for India. Market participants will be looking ahead to the release of GDP data later in the week. Investors will be also eyeing the Reserve Bank of India (RBI) board meeting later today to finalise its annual accounts, is also likely to take up the Bimal Jalan committee's recommendations on Economic Capital Framework (ECF) along with the dividend payment to the government. Meanwhile, the government will soon consider a proposal of relaxing rules for complying with the mandatory 30 per cent local sourcing norms by foreign single brand retailers. However, some cautiousness may come as Moody's Investors Service revised downwards India's GDP growth forecast for the current year to 6.2%, saying the economy remains sluggish due to a combination of factors such as weak hiring, distress among rural households and tighter financial conditions. The GDP growth forecast for 2019 calendar year was revised downwards from its previous estimation of 6.8%. The same for 2020 was also lowered by a similar 0.6 percentage points to 6.7%. There will be some buzz in the banking stocks as Finance Minister Nirmala Sitharaman announced upfront capital infusion of Rs 70,000 crore into public sector banks, a move aimed at boosting lending and improving liquidity situation. The move is expected to generate additional lending and liquidity in the financial system to the tune of Rs 5 lakh crore. Also, auto stocks will be in focus as the government announced several relief measures including deferring one-time registration fee, lifting a ban on the purchase of petrol/diesel vehicles by its departments and allowing higher depreciation, but it remained non-committal on the demand for a reduction in GST rates. In a bid to help clear rising inventory of BS-IV emission compliant vehicles, it said such vehicles purchased till March 31, 2020 will be allowed to ply till the validity of their registration.

The US markets declined on Friday after President Donald Trump ordered that US manufacturers find alternatives to their operations in China. Asian markets trading in red on Monday amid escalation in US-China trade war as reports said America will hike tariffs on $250 billion worth of Chinese goods to 30% from 25%.

Back home, Indian equity bourses staged recovery to end higher on the last trading day of the week. The start of the day was negative, as credit rating agency ICRA estimated that India’s gross domestic product (GDP) growth may ease to 5.5-6 percent in the first quarter (April-June) of the fiscal year 2019-20, amid a slowdown in the expansion of industry and agriculture. Domestic sentiments remained subdued during first half of the session, amid reports that Chief Economic Adviser (CEA) Krishnamurthy Subramanian virtually ruled out a major stimulus package for the economy, saying profit is private, losses are public is not good economics. He said sunrise and sunset phases for industry are usual and expecting the government to support industry in sunset phases can be morally hazardous. But, in the second half of the session, key indices gained the traction, following firm global markets. Domestic sentiments got a boost, as the Central Board of Direct Taxes (CBDT) said that small startups with turnover up to Rs 25 crore will continue to get the promised tax holiday as specified in Section 80-IAC of the Income Tax Act, 1961 (the Act), which provides deduction for 100 per cent of income of an eligible start-up for 3 years out of 7 years from the year of its incorporation. Market participants also took support with reports that the commerce ministry will soon come out with a new foreign trade policy, with an aim to simplify procedures for exporters and importers besides providing incentives to boost outbound shipments. Finally, the BSE Sensex gained 228.23 points or 0.63% to 36,701.16, while the CNX Nifty was up by 88.00 points or 0.82% to 10,829.35.